The Securities and Futures Fee (SFC) of Hong Kong has issued two circulars to control digital asset tokenization.
The circulars offer directions to intermediaries collaborating in tokenized securities actions and description the factors for tokenizing funding merchandise approved by the SFC.
The SFC considers tokenized securities as conventional securities with a tokenization layer. Because of this, the precise authorized and regulatory necessities that apply to standard securities markets additionally apply to tokenized securities.
The regulator specified that tokenized securities choices should adhere to the Firms Ordinance’s Prospectus Regime and the Securities and Futures Ordinance on affords of funding. Moreover, intermediaries offering recommendation on tokenized securities, managing tokenized funds, and facilitating secondary market buying and selling on digital asset buying and selling platforms should adjust to the present conduct necessities for securities-related actions.
The latest steering from the regulator coincides with Hong Kong’s exploration of tokenization. In February, the Hong Kong Financial Authority, performing because the de facto central financial institution, issued the world’s inaugural tokenized green bond, efficiently elevating roughly $100 million.
In keeping with the round, buying and selling platforms with licenses should set up SFC-approved compensation preparations to safeguard towards potential safety token losses. As an instance, operators of cryptocurrency buying and selling platforms can present their adoption of protecting measures like switch restrictions or whitelisting to make sure the safety of tokenized securities.
Conversations about tokenization have lately surged, and the SFC famous a heightened curiosity from monetary establishments in tokenizing conventional monetary devices throughout the international monetary markets.
The regulatory physique clarified that it has been reviewing totally different strategies concerning tokenizing SFC-authorized funding merchandise, together with these associated to the first providing and secondary buying and selling of tokenized merchandise on SFC-licensed digital asset buying and selling platforms. It added:
“The SFC sees the potential advantages of tokenization to the monetary markets, notably in growing effectivity, enhancing transparency, decreasing settlement time and decreasing prices for conventional finance, however additionally it is conscious of the brand new dangers arising from utilizing this expertise.”